Give Hardware a Chance ? LaunchCapital

The physical and digital worlds are colliding. The most exciting recent mobile innovation has been the product of the growing inclusion of the physical world.? Accelerometers, GPS and NFC tags have enabled mobile devices to expand beyond being merely one-way portals to the digital world. From activity trackers to location-based deals, mobile devices have demonstrated the numerous opportunities that arise from the interplay of the physical and digital world. While once the domain of only large corporations, technology has enabled businesses of any scale to participate in the awesome opportunity that is building connected hardware.

Design/Prototyping

Previously CAD software required prohibitively expensive specialty computers and an engineering degree to operate. Now through Google Sketchup and Autodesk, the process of designing a product is significantly easier and accessible. The current open sourced environment of CAD designs, also allows for the leveraging of existing designs. The process of turning digital designs into physical prototype is now seamless as well, through 3D printers and other personal fabrication tools.

Another major hurdle that previously encumbered small hardware producers was the inability to produce and acquire critical hardware tech.

Now that a lot of hardware technology has been commoditized, individuals can acquire prefabricated kits and chipsets cheaply, not to mention custom chips can now be manufactured inexpensively as well.

Production

The go to market strategy has radically changed for hardware startups.? Kickstarter and Etsy have democratized the means of reaching consumers, and Kickstarter in particular has been an excellent channel for market validation and early customer acquisition.

Added to the ease for startups, Foreign manufacturing is becoming increasingly accessible to smaller firms. Small Firms can also pursue domestic contract manufacturing, an opportunity previously not available. 3D printing and other fabricating tools are also laying the foundation for truly scale free manufacturing.

Community

The DIY hardware community, called the Maker subculture, is a major driver of the larger hardware movement. ?The increased availability of common platforms, easy-to-use tools, Web-based collaboration, and low cost technology has facilitated participation in the maker movement. Many contend that the current state of maker movement is reminiscent of the early personal computing movement that consisted mainly of hobbyists and tech enthusiasts. Whether one agrees with that comparison or not, the potential hardware innovation that can occur in garages all across the world is an incredibly exciting prospect.

Paul Graham, in his blog post on the Hardware Renaissance, perfectly explains the appeal of hardware from a consumer standpoint: ?physical things are great?. Tangible tech is just plain cool. Hardware companies on Kickstarter have surged in popularity, to the point where Kickstarter had to change its policy to require physical prototypes in order to curtail some of the irrational exuberance of consumers.

What?s Next

We have already seen the rise of hardware startups through companies that we have screened, seen on Kickstarter or watched graduate from the most recent Y-Combinator class.? Most of these companies are still in their infancy, so questions of sustainability still remain, but their initial success is a positive indicator.

The underlying question for hardware startups is scalability. Could the next Kickstarter project eventually compete with a major hardware producer? Some on Wall Street seem to think so, as 3D printing startup Form Labs was flooded with calls from Wall Street Analysts asking about the future of the company, during their Kickstarter campaign. Some even contended that drops in 3D Systems (DDD) stock price were attributable to Form Labs Kickstarter campaign. 3D Systems seemed to take notice as well, they recently filed a lawsuit against the fledging startup. As 3D Systems demonstrated, large corporations will staunchly defend their market share, which could be dangerous for future hardware startups.

Another issue facing hardware startups is the ubiquity of the mobile device. The perverseness of the mobile device is leading a lot of new hardware to become focused on its interaction with the mobile device rather than it own platform. While mobile accessories are an exciting field, focusing on mobile as a platform rather than a channel is limiting for future hardware innovation.

Its not all bad news though, startups have the benefit of building hardware for niche markets, or other markets that larger companies would deem too small or too risky.? Apple demonstrated ?both with the personal computer and the iPhone, that products can define the scalability of the market rather scalability determining the viability of the product.

Lawsuits aside, it is an exciting time to be a hardware startup.

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Source: http://launchcapital.wordpress.com/2013/01/15/give-hardware-a-chance/

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